In Step With the Times?

Time Warner Inc. is a leading Media and Entertainment Company engaged in providing Publishing, Broadcasting and Interactive Services. The business of the Company is broadly classified into five segments. The key segments include the Cable business that primarily comprises of interests in cable systems, providing video, high-speed data and voice services; the Filmed Entertainment business, which includes feature film, home videos and television; the Network System business, which operates cable television networks; and the Publishing business, which consists of magazine publishing. In this piece, we review Time Warner’s attempts to embrace new media.

Time Inc. conducts the magazine publishing business of the Company. It publishes 145 magazines across the world including its signature imprint, Time. The Company owns online sites like CNN.com, CNNMoney, Sports Illustratedand People.com. Time Inc. plans to sell of its Time4 Media and Parenting magazine groups consisting of 18 niche magazines.

Time Warner Inc. earned revenues of $44.2 billion in 2006 an increase of 4.3% from $42.4 billion in 2005. However, the publishing segment revenue saw a decrease of 1% or $29 million, out of which content revenues experienced a 15% or $14 million decline in revenues in 2006 and online advertising revenues witnessed a 41% jump in 2006 over 2005.

As a part of the future growth strategy Time Warner wants to take advantage of the strong and continuing secular online trends to grow its advertising revenues. The company has been aggressively managing its internet assets, pursuing new ventures and acquiring and making investments in the internet space. Time Inc. is bringing an end to its Life newspaper supplement and is going online with its entire collection of 10 million photos.

We reviewed the recently relaunched CNNMoney site. CNNMoney, a joint venture between Turner and Time Inc., has been spruced-up recently. It is a leading personal finance vertical site with over 8.2 million average monthly unique visitors, collecting high-order CPMs ($92-$143).

AOL’s latest online properties including TMZ.com, AOL Video and In2TV.com have been attracting significant eyeballs. AOL Video with its pay-per-download feature films looks promising, especially when held up against the prospects of leveraging content from Time Warner’s vast portfolio of proprietary video content (CNN, Warner Brothers, Miramax). The Video Search service makes it easy to search millions of music, news, sports and entertainment videos on the Web.

Sports Illustrated has 7 million unique visitors per month, with engagement levels on par with the online leaders. People.com is the number one online celebrity destination in terms of engagement. It has over 5 million unique visitors and 350 million average monthly page views. TMZ, a joint venture between AOL and Warner Brothers Television, is the number one celebrity site in terms of unique visitors per month. CNN.com is the number one online news destination, with more than 20 million unique visitors per month, and over 1.4 billion average monthly page views.

Advertising.com is a very interesting business and the recent deal with News Corp. and NBC Universal to serve and manage advertising for their new online video venture proves that the Company is well positioned to exploit the growing demand for targeted online advertising. The Company broke new ground with Gold Rush! – an interactive online reality game in which 11 million people participated.

Clearly the Company is working on a Business Model rebalancing, trying to grow its online advertising revenues. AOL’s network of Web properties attracts approximately 111 million unique visitors per month in 2006 and the Company is working on several innovative digital downloading trials and agreements.

A recently published analyst report by UBS suggests that Time Warner might either sell or merge its AOL division this year but the management has denied this and said that it is experiencing strong growth in its internet businesses and believes its new revamping strategy will see the company deliver better results in the future.

The Company has been successful in repositioning AOL as an advertising-driven business, which has enabled the Company register a robust growth of 49% in advertising revenues in the fourth quarter of 2006 growing much faster than the industry average. There is a noticeable urgency to heavily push video and social network initiatives across its sites.

Time Warner’s AOL acquisition did not really pay off for a long time. Today, however, with online advertising booming, and the company aggressively working on rebalancing its business model, finally, the pay day may arrive. In doing so, however, a rapid integration of all the Web 3.0 attributes would be an important in every single vertical they play in.